American Home Shield 2011 Annual Report Download - page 51

Table of Contents
The Comparable Operating Performance of SMAC and the Company's headquarters functions declined $2.2 million for the year ended December 31,
2011 compared to the year ended December 31, 2010. The segment's Comparable Operating Performance included restructuring charges of $3.5 million and
$1.1 million in 2011 and 2010, respectively, and interest and net investment income of $1.0 million and $1.8 million in 2011 and 2010, respectively.
Additionally, key executive transition charges of (i) $4.7 million were incurred in 2011, which included recruiting costs and signing bonuses related to the
hiring of our new CEO and CFO and separation charges related to the resignation or our former CFO and (ii) $5.0 million were incurred in 2010, which
included separation charges related to the retirement of our former CEO on March 31, 2011. The remaining $0.7 million increase in Comparable Operating
Performance primarily reflects a reduction in spending in the Company's centers of excellence, as well as favorable claims trends in our automobile, general
liability and workers' compensation program, which may or may not continue, ($1.8 million), offset, in part, by an increase in technology related costs for PCI
standards compliance purposes ($5.1 million) and incentive compensation expense ($3.7 million).
The segment reported comparable operating revenue, a 2.6 percent increase in operating loss and a 10.2 percent decrease in Comparable Operating
Performance for the year ended December 31, 2010 compared to 2009.
Merry Maids, which accounted for 92.9 percent of the segment's operating revenue for 2010, reported a 0.8 percent increase in operating revenue, a
100.3 percent increase in operating income and a 15.2 percent increase in Comparable Operating Performance for the year ended December 31, 2010
compared to 2009. Revenue from company-owned branches, which was 77 percent of Merry Maids' revenue in 2010, was comparable to 2009, reflecting a
1.3 percent increase in average customer counts, offset, in part, by a reduction in service frequency. Absolute customer counts as of December 31, 2010
compared to 2009 declined 2.9 percent driven by a decrease in new unit sales, offset, in part, by a 150 bps increase in the customer retention rate. The average
service price in 2010 was comparable to 2009. Royalty fees, which were 18 percent of Merry Maids' revenue in 2010, increased 1.7 percent in 2010 compared
to 2009, primarily driven by market expansion.
Merry Maid's operating income for the year ended December 31, 2009 included a pre-tax non-cash impairment charge of $5.2 million to reduce the
carrying value of trade names to their estimated fair value as further discussed in Note 1 to the Consolidated Financial Statements. There were no similar
charges in 2010. Merry Maids' Comparable Operating Performance as a percentage of revenue increased to 26.2 percent for the year ended December 31,
2010 compared to 23.0 percent for the year ended December 31, 2009. The 320 bps increase in Comparable Operating Performance as a percentage of
revenue reflects production labor efficiencies, a reduction in legal related expense, sales and marketing expense, incentive compensation expense and
healthcare costs, offset, in part, by an increase in other overhead and support costs.
The Comparable Operating Performance of SMAC and the Company's headquarters functions declined $12.3 million for the year ended December 31,
2010 compared to the year ended December 31, 2009. The segment's Comparable Operating Performance included restructuring charges of $1.1 million and
$14.4 million in 2010 and 2009, respectively, and interest and net investment income of $1.8 million and $3.0 million in 2010 and 2009, respectively.
Additionally, key executive transition charges of $5.0 million were incurred in 2010, which included separation charges related to the retirement of our former
CEO on March 31, 2011. The remaining $19.4 million decrease in Comparable Operating Performance primarily reflects increased provisions for incentive
compensation ($5.1 million), due primarily to the reversal, in 2009, of a $4.4 million reserve for cash awards related to a long-term incentive plan as certain
performance measures under the plan were not achieved, and increases in spending in the Company's headquarters
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